More GPs face higher tax bills after Autumn Statement freeze

24th November 2023 by NASGP

More GPs face higher tax bills after Autumn Statement freeze

Despite the abolition of Class 2 National Insurance contributions, more GPs face higher income tax bills, accountants have warned.

Andrew Pow, board member of the Association of Independent Specialist Medical Accountants, said: “The 2% cut in the main employee NIC rate from 6 January, coming three months earlier than the self-employed reduction, will benefit salaried employees and other staff members,” he said. “For a salaried GP on £50,000, this will mean a saving of around £700 a year.”

Pow added that GP locums would save £192 a year from the abolition of Class 2 National Insurance contributions (NICs), and benefit from a 1% cut in Class 4 contributions on profits between £12,570 and £50,270 in the new tax year. For a self-employed GP on £50,000, the Class 4 cut will save around £375 a year.

But, he explained, some of these savings will be lost: “The bigger picture, however, is that because income tax thresholds remain frozen until 5 April 2028, more people are paying more tax at higher levels.”

Liz Densley, director of AISMA firm Honey Barrett, said: “National insurance for employees takes effect from 6th January 2024. The employee rate is cut by 2% for earnings between £12,570 and £50,270 so the maximum saving p.a. is 754.00 for those earning over £50,270.” But, she added, for people using their own company and paying a low salary with dividends there is no change at all.

Densley also noted that from next April ‘cash basis’ rather than ‘accruals basis’ will become the default method for accounting, so GP locums will be taxed on the received and expenses paid rather than the period to which they relate.

She concurred with Pow’s remarks, saying: “There is no change to tax rates – but inflation will generally mean that more higher-rate tax will be paid proportionately as salary increases.”

No new GP funding was announced in the Autumn Statement, and the national minimum wage will rise by £1.02 from April: both factors are likely to increase the pressure on general practices.

Dr Richard Fieldhouse, NASGP chair, said: “I think our current Chancellor may have been the sort of kid who used to hide his broccoli under the side of his plate to pretend he’d eaten it. He’s now trying it out on us with his Autumn Statement. It might look good for now, but we’ll be no better off down the line.

“As always, we really appreciate our accountancy colleagues at AISMA and Honey Barrett for looking after our long term financial interests and helping us navigate the murky waters of tax and national insurance.”

Join our free trial for finance stories that affect sessional GPs.

"LocumDeck is self-explanatory and having never made/sent an invoice before it's made my life a lot easier, and made me feel reassured I hadn’t forgotten anything important.

I’ve recommended it to my colleague/friend who is also starting out as a GP locum."

Dr Christine Vickery, GP

Dr Christine Vickery, GP

See the full list of features within our NASGP membership plans

Membership